Estee Lauder’s sales forecast hit by China lockdowns, stronger dollar

Bloomberg

Estee Lauder Cos’ sales forecast trailed analyst estimates amid continued lockdowns in China and pressure from the strengthening US dollar.
The fragrance and skin-care company said that it expects an 8% to 10% drop in sales this quarter, compared with a year ago. Analysts surveyed by Bloomberg expected revenue to be roughly flat in the quarter, which is the first in Estee Lauder’s fiscal year. The company’s annual forecast also missed estimates.
Pandemic restrictions in China have been a drag on growth at Estee Lauder, which typically generates around one-third of its revenue in the country. In May, the company slashed its annual forecast in large part due to limited capacity at distribution centres in Shanghai. While those facilities are back up and running, Estee Lauder said recent lockdowns in the island province of Hainan are a “strong headwind.”
The company said its fiscal first-quarter results will also be hurt by the end of license
agreements for the Donna Karan
New York, DKNY, Michael
Kors, Tommy Hilfiger and Ermenegildo Zegna product lines. Rupesh Parikh, an analyst at Oppenheimer & Co, said a weak forecast was expected.
“With this negative guide-down out of the way, we believe the setup for EL should improve as the year progresses,” Parikh said in a note to clients.
Fellow high-end retailer Tapestry Inc also cautioned about weakness in China in its earnings results. The parent company of the Coach and Kate Spade brands said revenue in China fell more than 30% in the three-month period ended on July 2 due to Covid-related
disruptions.
Tapestry executives said they expect revenue in China to decline 15% in the current quarter and bounce back to growth in the company’s fiscal third quarter.